"Enormous dosages of monetary medicine
continue to be administered and, before long, we will need to deal with
their side effects." - Warren Buffett

"Hyperinflation, a non-classic inflation, is always
and will be again be the consequence of a CURRENCY EVENT that no one
understands now or will understand when it happens, which it will."
- Jim Sinclair

"The US bankers have put together a nasty cocktail.
They expect to force foreign creditors to drink it, but those who developed
on Wall Street and the US government ministries will have to drink it
themselves." - Petr from Germany (a banker und subscriber)

INTRODUCTORY UPDATE

◄$$$ See the Special
Report entitled "Non-Existent
Exit Strategy" for the August Hat Trick Letter.
While Professor Ben Bernanke congratulates himself for saving the banking
world, the banking sector girds for a powerful second wave of crisis.
He is a clown without a suit who fails to notice that he has painted
himself into a corner. The more respected global bankers like Axel Weber
of the Bundesbank caution that more trouble lies ahead. The practice
of USTreasury monetization, after colossal bond fraud in recent years,
will not be tolerated by foreign creditors. Its open recognition will
lead to greater abandonment, even failed auctions. The
US will soon suffer curtailed credit or a USDollar devaluation or both,
hallmarks of the Third World. Confidence and
faith in the USDollar is highly likely to diminish to crisis levels.
Recent higher profile bank failures like Colonial and Guaranty will
deplete the FDIC by more than $5 billion. The Federal Deposit Insurance
Corp will very soon be exposed as broken. Several hundred other midsized
US banks limp along, not having been shut down by the FDIC, since its
rescue fund is depleted. A New Resolution Trust Fund is needed for bank
asset cleanup, but it cannot be formed due to massive trillion$ fraud.
Details are given. More bank failures and wreckage cleanup render an
Exit Strategy as a distant proposition at best, and an impossibility
at worst.

A deflation cocktail backfire is in the
works. The preoccupation with falling prices
of products and assets has distracted attention from the colossal monetary
inflation and credit creation in USTreasury debt.
A declining money velocity again ignores the bank sector. Prepare for
price inflation. John williams provides a theory on the path to hyper-inflation
from falling demand for money. A pictorial sequence tells the story
sure to lead to powerful political pressures. The call to produce price
inflation will become a loud scream soon. Pressure is relentless to
turn on the inflation spigot full blast. The process is well along without
much further push. Apparent stability precedes hyper-inflation, as floodgates
are gradually opened over time, actively or passively.

◄$$$ MARTIN ARMSTRONG IS A FINANCIAL
MARKET ANALYST, JAILED FOR KNOWING TOO MUCH ABOUT INNER WORKING WALL
STREET CORRUPTION. HE IS PRESCIENT, AND GIVES FURTHER WARNINGS. $$$
The latest analysis by Martin Armstrong has found its way from his prison
bars. He cannot be totally silenced. He warns in an August 7th release
entitled "Cycles & Pattern Projections"
of a consolidation stage soon to end that lifts the gold price to triple
its current level, first from a global monetary crisis, then a follow
through due to the arrival of price inflation.

Armstrong wrote, "Gold
continues to consolidate below $1000. This is a critical sign that confidence
is swinging away from the government.
Just as China is concerned for the dollar, they speak the truth, unlike
the BS from Washington. They are speaking from self-interest and so
is Washington. China is concerned about its holding in dollars and has
been reducing the maturity of their holdings. The Washington crowd has
been speaking out of their self-interest insofar as they do not want
to face reality. They keep telling everyone 'don't worry-be happy.'
It appears that gold is building a
base from which a rally up to $2500 to $3000 area is very likely.
There is even a possible rise to the $5000 level, but that is the most
extreme projection. This is suggesting that confidence in the dollar
is declining. This is not the classic inflation nonsense, but a collapse
in currency value consequence." See the Scribd
article (CLICK HERE).

◄$$$ GOLDMAN SACHS CONTINUES ITS
PARASITE ROLE OVER THE STOCK MARKET WITH FULL AWARENESS AND COMPLICITY
BY REGULATORS. $$$ The guys at Zero Hedge are not amateurs. They are
four ex-Wall Street pros with over two decades of corporate financial
advisory, investment, and operational experience. They subscribe to
the 'critical importance of anonymity and its role in dissident speech.'
Max Keiser and Tyler Durden (their pseudonym taken from the hit counter-culture
movie "Fight Club" with Brad Pitt and Ed Norton) tear into Goldman Sachs
during an interview. They reckon GSax siphons
off $100 to 200 million per day from the NYSE through high frequency
trading. Their fraudulent scam is committed
in broad daylight, fully exposed since the theft of their illicit software.
Law enforcement officials at the FBI have protected their illicit software
tools and refuse to prosecute them. Regard the NYSE and SEC to be fully
complicit with the full knowledge. The game is perpetuated, even endorsed
by the press, moronically justified under the guise of providing liquidity
to financial markets. Then a mosquito provides liquidity to the human
body in northern New England in summetime. Durden
calculates their siphoned efforts earn at least a 40% risk-free rate
of return!! This is crony capitalism and more
evidence of The Mussolini Fascist Business Model at work. See the Seeking
Alpha video with Max Keiser and Tyler Durden (CLICK HERE).

◄$$$ THE COUNCIL ON FOREIGN RELATIONS CONTROLS
THE US FOREIGN POLICY, AND THE STATE DEPT IN PARTICULAR. EVEN SECY STATE
HILLARY ADMITS IT DURING A GENUFLEXION. $$$ Those who think the USGovt
is 'of the people, by the people, and for the people' are naïve
to a shameful level, living in darkness. The Council on Foreign Relations(CFR)
is the crucible, the nerve center, and the puppeteer for US foreign
policy and control. It wields tremendous influence and power over the
USGovt in direct and more subtle ways. Its tentacles extend to the USMilitary
and beyond, with almost no policy made without consultation by other
USGovt ministries that extends beyond the US borders. They are a populist
grassroots union. Their constituents are some of the most powerful people
in the nation, with a clear leaning toward global concentration of power
and other objectives toward supra-national sovereignty, led by David
Rockefeller (in person or in spirit). They undoubtedly picked Hillary
to serve in office as puppet. She met with them recently to acknowledge
her controllers. The organization is among the Elite with global scope
and reach, hardly secretive anymore, but membership is invitation only.
Speaking at the CFR a couple months ago, Treasury Secy Geithner stated
that he was amenable to the idea of a global currency to replace the
USDollar. Unlike the Bilderbergs, the Council on Foreign Relations is
more open to the press. They have energetically promoted the Globalist
agenda that serves to weaken American sovereignty.

Hillary Clinton openly admitted CFR control over USGovt
Policy, all but in actual words. Her remarks came during a recent speech
at the CFR's new WashingtonDC branch, at an opening ceremony. She showed
deference to CFR President Richard Haas, saying "Thank you very much,
Richard, and I am delighted to be here in these new headquarters. I
have been often to the 'Mother Ship' in New York City, but it is good
to have an outpost of the Council right here down the street from the
State Department. We get a lot of advice from the Council, so this will
mean I will not have as far to go to be told what we should be doing."
Her admission was posted on the US State Dept website. Clinton essentially
described herself as ready to take CFR orders. Whether her remarks were
intended to show appreciation for guidance or outright control is debatable.
Important truths often are revealed under many guises. This one stands
as one of the more obvious unspoken truths in how major American Foreign
policy is shaped and controlled by the CFR. See the entire InfoWars
video clip (CLICK HERE).

◄$$$ JAPAN MARKETS ITS GOVT BONDS
TO THE PUBLIC IN A WAY CONSIDERED SHAMEFUL, MORE A FARCE. THE UNITED
STATES AND ENGLAND COULD CONSIDER THE SAME APPROACH. IF THEIR PEOPLE
ARE LARGELY BROKE OR WOUNDED, THEY ARE DEEPLY DISGUSTED AND DISTRUSTFUL.
$$$ Japan is clearly leading the way! 'Peace of mind. Piece of happiness.'
Such is the promise the Japanese Govt makes to its citizens if willing
to finance a small hunk of their ballooning debt. The Japanese Finance
Ministry has called in advertising experts to help drum up Japanese
Govt Bond demand. Their landscape will soon find the commercials plastered
on taxis and television screens.One must wonder when the USGovt will
running late night infomercials to sell its debt? As Craig McC in San
Francisco urges, "Obama could be the host with
Geithner, Bernanke, Summers, Wall Street banksters, even Pelosi as the
enthusiastic co-hosts. Fill the audience with Acorn, UAW, SEIU, political
party hacks, and other plants. Get Oprah to produce it."
What an absolute farce! Reality is stranger than fiction! See the UK
Telegraph article (CLICK HERE).

◄$$$ MYTH BUSTING SEEMS A NEW PURSUIT.
$$$. The fine folks at Investopedia.com have produced a few more mainstream
busted myths. They all make sense, but their list is kindergarten material
directed mainly to investments. It is still worth thinking about. They
overlook the major myth chapters that actually sustained an entire USEconomy
for three decades. They cite Myth #1) Need to be in the safest stocks
to make any money, Myth #2) Bonds are the safest place to be, Myth #3)
When the stock market rises, the recession is over, Myth #4) De-coupling
has made some countries safer investments during a recession, Myth #5)
Real estate is a safe place to be during a recession, Myth #6) Dividend
stocks do not fall as much during a recession. Finally, they conclude:
"Bottom Line) Investing during a recession is
a humbling experience. Many well-respected money managers had the worst
year of their careers in 2008, proof that even those most familiar with
the markets can be caught completely off guard."
Tragically, the majority, even the Investopedia folks, fail to recognize
that the US financial system has broken irreparably, never to be revived
with its current US$-based foundation. See the Yahoo Finance article
(CLICK HERE).

◄$$$ A CLIMAX OF EVENTS IS IN PROGRESS,
AS SIGNALS MOUNT, AND CLIMAX SEEMS NIGH. $$$ A close friend of a close
friend has numerous connected contacts within the power structure. He
passed along a note that caught my attention, when not many personal
notes do so. It follows with his descriptions, and only minor edits.
His points will be summarized without quote, with much gratitude for
his shared message. Several key events are lined
up simultaneously, enough to warrant greater perceived likelihood of
at least a declaration of state of emergency in the United States.
If could result easily in martial law. He pointed out astutely that
the Chinese stock market is under pressure, so the Chinese might have
political cover (an excuse) to call some money home and withhold on
some credit supply to the hapless flailing out of control Americans.
They might deliver a 'Ripple Effect' passively or a 'Direct Message'
more actively, as they call money home, or as he says remove chips from
the tables. He cited the 'Investment Banker' scuffle taking place in
Europe with Porsche/VW, but that seems minor. The endless skirmishes
between the crude oil hedge versus the beleaguered USDollar speaks volumes
when clearly demand has fallen and supply has risen. The smart money
is hedging against the US$ clearly. The effects of both the criminally
administered TARP Funds and the mindlessly vacant Stimulus Plan have
run their course, unable to give any further assist to the USDollar.
His USMilitary intell
contacts have suddenly turned silent
at a time when the Pentagon has let it be known of a need for 400 thousand
troops to keep the peace inside
the United States. Rumors fly that the Pentagon
want all 'ready by the end of August' without anything to refute. In
the USMilitary command for Afghanistan, a major change has begun. And
in Iraq, an Army General has said 'all significant troops out by the
end of August and back home in America.' Rumors also report how another
False Flag Attack is en route, in the planning stage. This attack is
mentioned by a certain source as aimed for WashingtonDC on October 19th.

The last False Flag Attack was World
Trade Center and Pentagon on 911 for all those whose brain stems are
not disconnected, or brain cavities unused. Be sure to know that Sinking
the Maine off the Cuban coast is well known to be another False Flag
Attack to trigger the Spanish American War. The signing of the TARP
Fund bill also coincided with a threatened martial law by then Treasury
Secy Paulson, and an unannounced threatened attack on WashingtonDC in
late September 2008. The signing of the Patriot Act also coincided with
an actual threat of Anthrax Attack of the Congressional ventilation
systems. It seems that legislation to terminate
the Republic and alter the pathways for the benefit of the syndicate
have staged events and real threats surrounding them. Some argue that
911 coincided with a hidden Coup d'Etat.

The sad part is most American people
do not seem to notice. Perhaps they will when the Republic is turned
into a communist state or into a police state, the internment camps
given some attention. For a brief exposure to Intelligence agencies
gone amok, check out the well studied GLADIO project, which has been
reactivated by the CIA in Europe in July. The bombings started a few
weeks ago in Spain, with the latest bomb having gone off under a Guaria
Civil police car in Mallorca. This is the beginning of a series of staged
incidences to destabilize governments and society in general. See the
YouTube video clip (CLICK HERE)
that chronicles briefly the 'Stay Behind' Forces that were originally
intended to fight Soviet attacks on Western Europe, but whose splinter
groups began a wave of terrorism to undermine various government structures.
The project has been revived!

A sage contact who forewarned of the
September 2008 sequence of failures and crisis almost one year ago sent
a message of update this weekend. He said, "We
are in the middle of the breakdown. Just watch the US budget disaster
that is killing all and everything. Things are coming apart at the seams
since the entire global banking system is breaking down. Trade is breaking
down as well due to banks being in shock
freeze. This shock freeze will not
go away, it will destroy the system. Different systems will soon spring
up to facilitate trade. We shall see
the tail end of the financial economic political hurricane touch down
sometime at end of August and early September with an never ending downward
spiral that will destroy assets on a grand scale.
I still expect the breakdown to be in the time frame we have been discussing.
The pump and dump market manipulations by the BOYZ are fascinating to
witness. Its like watching a head kill shot in slow motion. Only real
hard assets will survive, Gold, Silver and a basket of essential commodities
grouped around this precious metal core."

Notice the anticipated timeframe, an
anniversary of the crisis last year. My response to him was brief and
simple, but to the point. "I notice tectonic
shifts in the currencys in the last two weeks. The USDollar is stuck
in a tight range, soon to exit in unstable fashion. The British Pound
Sterling moves up and down with much volatility. More US banks are falling.
Big ones like Colonial and Guaranty just died. Soon much bigger ones
will fail. The types of credit losses are soon to broaden into Commercial
and Prime Option ARM mortgages. Banks are still in a nightmarish situation,
unprepared, while clown leaders proclaim an end to the storm."

◄$$$ THE NATIONAL GUARD INTERNMENT
CAMP ADVERTISEMENT WAS YANKED FROM THE MONSTER JOB BOARD. IT STILL APPEARS
IN SOME FORM ON THE NATIONAL GUARD JOB BOARD. $$$ The advertisement
that appears and is removed like a guerrilla warrior showing himself
in the brush and then retreating, can be seen at times on their job
website board (CLICK HERE).
It is an advertisement by the National Guard promoting the Military
Occupational Specialty (MOS) of 'Internment/Resettlement Specialist.'
One must ask the questions: Why does the National Guard need to recruit
such specialists? What do they know that we should know? The Examiner
wrote an excellent article about the growing police state. They wrote
the following.

"Some suggest that these facilities are being prepared
for large numbers of illegal immigrants. This seems extremely doubtful,
however, considering the propensity of the federal government to (1)
do next to nothing to seriously curtail the flood of illegal aliens
into America, (2) do virtually nothing to apprehend illegals known to
be in the US, and (3) do everything it can to facilitate the release
of those illegals incarcerated by State and local authorities. To think
that the federal government intends to place thousands
of illegal aliens in internment camps
borders on lunacy. If anything, the federal government (with either
Democrats or Republicans in charge) has done everything it can to (1)
entice illegals to come to America, and (2) provide every incentive
for them to stay illegally in this country after having entered. I feel
safe in saying that we can eliminate the possibility that these camps
are being prepared for illegal aliens. Others suggest that these internment
camps are being constructed to accommodate 'enemy
combatants' from the Iraq and Afghanistan wars.
Yet, the total number of these types of detainees is miniscule compared
to the detention space being constructed… Then, of course, there
are those who continue to deny that these internment camps exist at
all. But then, were there not thousands of Germans who denied
the existence of concentration camps during World War II?
These types of people would refuse to believe the sun came up in the
east if the government spinmeisters told them it did not."

This camp existence denial is yet another
parallel to the events in Nazi Germany 70 years ago. Other parallels
can be listed. Reichstag burning and Krystalnacht events were the World
Trade Center demolition and Pentagon missile attack rolled into one.
The Security Act that heralded the fascist movement was the Patriot
Act, which abridged rights and unleashed the hunt. The War against the
invisible Zionist Army was the War on Terrorism against Islamic Armies.
Denial of death camps is the next item in synch. One must ask where
many of the US leaders came from. See the Examiner article (CLICK HERE).

CHINA SHUNS USDOLLAR &
SEEKS GOLD

◄$$$ CHINA HAS REDUCED ITS USTREASURY
BOND HOLDINGS. BUT THE ACTUAL REDUCTION IS PROBABLY FAR MORE THAN IS
OFFICIALLY REPORTED. BEIJING LEADERS ARE MAKING NUMEROUS $BILLION DEALS,
MANY SMALL, SOME LARGE, AS PART OF AN INITIATIVE TO REDUCE EXPOSURE
AND SECURE HARD ASSETS. $$$

In the USTreasury TIC Reports, China
is cited for having sold $25.1 billion of USTreasury bills in June to
bring its holdings down to $776.4 billion. The Beijing bankers have
clearly removed far more than that, but such is the official data. If
the Chinese Govt uses their vast hoard of USTBonds in grand purchases,
like for European industrial property, the USTreasury might actually
be the last to know in their record keeping. Or if China uses USBonds
for grand investments in Africa for mineral properties, the USTreasury
might actually be the last to know in their record keeping. The
Beijing leaders have openly expressed an urgent need to adjust the structural
imbalance of its FOREX reserves, so that the value of reserve assets
could be preserved and enhanced. They actually
have the largest volume of USGovt debt securities in nearly nine years
(Treasurys & Agencys), according to the June data. They also have
the biggest position in USTBonds, having surpassed Japan in recent months.
Japan and the United Kingdom, second and third largest holders of US
debt, increased their holdings over the same period.

Despite the small cutback, Chinese
holdings of US debt are about 7% higher than at the start of the 2009
year. In 2008, the Chinese increased their holdings in US debt by a
whopping 52% over 12 months. Beijing leaders
have pushed aggressively for a new global currency regime, in particular
for the super-sovereign IMF basket of currencies to supplant the USDollar.
They are openly concerned about enormous erosion to the US$ valuation,
from the parade of USGovt stimulus and rescue programs. The British
Broadcasting Corp correspondent reported, "China
has said it would like to establish an alternative to the USDollar as
the world's favoured currency for foreign exchange reserves. So far
there is no evidence that there is a suitable alternative. But these
figures suggest they are exploring ways to diversify their investments
where they can." China is buying a lot of gold,
very quietly. They are also jockeying to buy a hoard of IMF gold, with
political astuteness. See the BBC article (CLICK HERE).

◄$$$ THE CHINESE CENTRAL BANK IS
BEING URGED BY THEIR MOST INFLUENTIAL PRIVATE ECONOMIST TO PERMIT THE
YUAN CURRENCY TO RISE. THIS CAN BE ACCOMPLISHED BY STERILIZING
LESS, MEANING CONVERSION OF MORE USDOLLARS TO YUAN FROM TRADE SURPLUS.
THIS COULD BE POLITICAL COVER FOR SMALLER TRADE SURPLUS THAN REPORTED.
$$$

The Chinese Govt has for years slowed
the tide of a rising Yuan currency by refusing to permit the USDollars
to convert to Yuan, keeping them held in USTreasury form, unconverted.
Yu Yongding is the most influential Chinese economist, a former member
of the central bank's monetary policy committee from 2004 to 2006. He
celebrated this week with a chest pounding to note a 21% gain in the
Yuan since July 2005, when it began to float but with linkage to a basket
of currencies. Yu Yongding now urges the Chinese Govt to reduce Yuan
sales aimed at keeping the currency weak so it can someday float freely.
He said, "The Peoples Bank of China should try
to reduce intervention on the exchange rate as much as possible. Eventually,
the yuan should be demanded as a reserve currency, and we are far away
from this stage." Yu acknowledged that more
overseas investment must be encouraged, even as exports must be reduced
to a degree. He urged the sales of Yuan-denominated
debt by foreign companies to be done as part
of a transition away from managing the Yuan currency and piling up US$-based
assets. Chinese FOREX reserves rose 9.1% in
2Q2009, jumping a record $178 billion, to reach a
total of $2.13 trillion (=$2130 billion)
on June 30th, according to central bank data.
A double-edged sword is evident. Chinese bankers do not wish to accumulate
more USTreasurys or other US$-based bonds. However, they do not wish
to see their Yuan currency rise either, since that would crimp exports
from a price standpoint. Their unstated goal is to maintain a Yuan value
near 6.83 per US$ since July 2008. Holding the Yuan from further gains
also prevents losses to their vast US$ denominated bond portfolio. The
central bank reiterated its goal on August 5th to keep the Yuan stable
at a 'reasonable and balanced' level.

◄$$$ EVENTUALLY CHINA WILL TREAT
THE US-UK COLONIALISTS THE SAME WAY IT WAS TREATED A CENTURY AGO. IT
WILL USE THE UNITED STATES LIKE ITS OWN COLONY. THE UNITED STATES WILL
SOON FIND ITSELF DESPERATE TO SECURE A CREDIT LINE. THE BANKER NATION
OF CHINA MIGHT IN ITS OWN SELF-INTEREST RESCUE THE U.S.A. BUT AT A HEAVY
COST WITH PROFOUND IMPLICATIONS. SOME VENGEANCE IS LIKELY, LIKE WHAT
ENGLAND DELIVERED TO ICELAND. $$$

The credit needs for the United States
Govt and USEconomy will soon spawn a major crisis. The USGovt and UKGovt
deficits and debt issuance are fast growing out of control. The
next stage of the crisis will isolate the USGovt as debtor.
Disarray in the Persian Gulf from failed construction projects, and
vanished Japanese trade surpluses will present China as the only potential
bailout source. Arab sheiks have been burned too many times. Acting
with motivation to preserve the majority of value in its US$-based reserve
holdings, China might agree to assist the USGovt and USEconomy, but
at a very steep price that thrusts Chinese power
to the banking arena and elevates the Yuan currency into a global reserve
alternative along with the Euro. In the template
for US-China relations, where they claim to forecast America's destiny,
Generational Dynamics pitched in. They point out the culpability of
China in building an industrial base with exported US debt, and now
face an unstable economic situation themselves from transmitted bubbles.
They wrote the following.

"Today, as the level of public debt increases exponentially,
there will come a time when America will face a currency and financial
crisis similar to Iceland, and the Chinese will
be forced to try to bail out the United States in order to save themselves.
The Iceland situation provides us with further guidance in predicting
how this coming crisis might unfold… Will China be as vengeful
and vindictive as the British and the Europeans toward Iceland? There
is no doubt about it. We can see a sample
of China's vengeance in their policies towards the Australian company
Rio Tinto, the second largest mining
company in the world… The Chinese
were furious, and in recent weeks have
arrested four employees of Rio Tinto in Shanghai. At first it appeared
that the employees would be charged with stealing state secrets, which
would have been punishable by death. But after international pressure,
led by the Australians, the charges were reduced to corporate espionage
and bribery.

This incident provides just a tiny
taste of the kind of vengeance
we can expect from the Chinese in the case of an inevitable default
by the United States. The Chinese
will angrily agree to 'bail out' the US, by forgiving some of America's
debt. But the Chinese will also jail Americans on various charges, and
will make onerous fiscal demands on the US, as well as demands for greater
international control over the dollar currency.
This will frighten and infuriate the American people, and the charges
and counter-charges will eventually spiral into full-scale war. From
the point of view of Generational Dynamics, a war
between America and China is 100% certain…
All scenarios lead to the same place, a Clash of Civilizations World
War, with China versus the United States in the lead."
See the Generational Dynamics article and complete list (CLICK HERE).
One should also expect a wave of colonization, that includes residential
property, commercial buildings, industrial plant, and farmlands. Never
forget that China has little arable land and many mouths to feed. They
are increasing their USAgency Mortgage portfolio, for likely conversion.

USDOLLAR & BRITISH POUND
FACE THE AXE

◄$$$ FOREIGN CREDITORS ARE ACCELERATING
THEIR MARCH OUT OF US$-BASED BONDS. NET OUTFLOWS ARE NOW A FIRM TREND,
WITH THE WORST DEPARTURE WITH USAGENCY MORTGAGE BONDS. A FULL 15 YEARS
OF GROWTH IN THEIR ACCUMULATION HAS LARGELY BEEN REVERSED IN THE LAST
TWO YEARS. THE PATTERN IS EXTREMELY OMINOUS FOR THE BELEAGUERED AND
REJECTED GLOBAL RESERVE CURRENCY. $$$

In an August article by the Jackass entitled
"Monetization of USTreasurys In Isolation"
(CLICK HERE),
the ominous condition behind foreign creditor abandonment in its early
stages is described. Disaster upon revolt is a better depiction. "I
find this simple chart so ominous I had to send it. Decelerating year-over-year
inflows and outflows across the board. Stick your head in the sand if
you like, but string this trend out a little longer and you are going
to have flight from the dollar." So wrote CIGA
Eric DeGroot. See the article that displays this graph and his few words
(picture says enough) on the JSMineset weblog (CLICK HERE).
It is very brief.

The chart below delivers a powerful message.
It covers several important types of US$-based bonds, their inflow and
outflow, and the aggregate GrandNet. The financial data is publicly
available from the USGovt Treasury Intl Capital (TIC) Reports. Inflows
of foreign funds are dwindling almost across the board. In
the case of USAgency Mortgage Bonds and USCorp Bonds, the nation is
witnessing something unprecedented, the net outflow of funds.This is outright rejection in flight.
The chart exposes the isolation problem for the USDollar in the bond
world, clearly the most important market beneath the currency market.
The printing press is the last option, hardly hidden any longer except
to the loyalists and the blind. The USGovt is exposed as insolvent actually.
The USDollar stewards are NOT demonstrating
control, discipline, or even anything remotely resembling honesty or
integrity. Worse, the USGovt plans gigantic
new programs loaded with new spending, adding to the deficit, and infuriating
China in particular. See the costly Health Care program. If federal
deficit reduction were a high priority, the endless war would be cut
short. Fiscal responsibility is nowhere a priority. A gathering storm
of revolt comes.

The foreign creditors are moving away
from the United States, as is plainly evident. The big bold red series
shows the Grand Net US$-based bond reduction in net flow change from
a high around $950 billion in early 2007 to a figure now approaching
only $200 billion, thus a severe cut in net inflow. The greater alarm
comes from the USCorporate Bonds in the yellow series, whose net flow
change is down from a plus $600 billion high at the same time to a slight
net outflow negative figure now. The USAgency
Mortgage Bonds in chartreuse/mauve/pink have
net flow change with peak of plus $300 billion at the same time to a
net outflow of a frightening $150 billion now.
Since the important peak for mortgage and corporate bonds, the USTreasurys
in blue series have recovered from a $200 billion net positive inflow
to a $400 billion net inflow. However, one should suspect that the USFed
is purchasing its own USTreasurys. It does so directly from primary
bond dealers as well as from convenient accounts bearing foreign names,
using American funds, and laced with sinister motives founded in deception.
Foreign institutions in all likelihood are not the main purchasers.

◄$$$ A HUGE SCARY FOREX DISCOUNT
IS BEING USED RIGHT NOW BY MARKET INTERMEDIARIES FOR CASH CURRENCY TRANSACTIONS.
THIS IS A CLEAR LOUD PREVIEW OF FUTURE US$ AND BRITISH POUND STERLING
DEVALUATION. THE DISCOUNTS PROBABLY OCCUR ON GRAND ACQUISITIONS, SPENDING
US & UK DEBT, IN CONVERSION TO HARD ASSETS. $$$ Last week, my email
INBOX was abuzz. A query came from me to a reliable regular banker contact
with connections to Europe, Asia, and the Persian Gulf. My query specifically
commented on the frenetic British Pound Sterling, which has risen or
fallen by almost 200 basis points on a several days in the last week
or more. It shows great unstability, my point, likely a prelude such
as any initial tremors before a big earthquake. What came back was a
shock, as news of actual liquidation activity have come his way.

***He wrote, "Really
substantial transactions in buying USDollar are done at a 38%
discount, and British Pound Sterling
are done at a 42% discount.
The big off market transaction guys are already factoring in the coming
devaluation. Hundreds of billions are involved, including outright cash
transactions where those discounts are being applied."
***WOW!! He had mentioned just days before in another exchange that
a big event comes on the near horizon having to do with angry USGovt
creditors. They have run out of patience. They feel the USGovt pays
no heed to their concerns, in displayed arrogance.

The global banker said a
coordinated group of foreign creditors are planning to sell several
hundred billion in USTreasurys in the months of September and October.
If executed, then a US bank holiday is assured, and a significant devaluation
of the USDollar comes. We might even see the first hint of a temporary
USTreasury default. In the same line of exchanged communications, that
also involved a couple other fellows who are respected, questions came
as to when this charade would end. The US$ had bounced yet again on
vaporous news and heavy interventions. My comment was simple: GOLD WILL
RISE AND THE USDOLLAR WILL FALL, IN A POWERFUL WAY, WHEN CHINA DICTATES
IT, WHEN CHINA IS READY, WHEN CHINA DECIDES IT. My connected banker
contact agreed totally. Furthermore, Chinese agency organizations have
been gathering considerable information from the Gold Anti-Trust Action
committee, probably to make the case that the USDollar is not legitimate
even on US Constitutional terms. When they slam the US$, they will likely
make the case for an illegitimate USDollar operating as the currency
by a financial sector ripe with corruption and fraud.

The British Pound seems to be acting
schizoid, with the Euro also making some big moves but of lesser magnitude.
Notice the Euro is right back to the 143 level again. The Pound sterling
fell hard versus the US$ early last week when the incompetent managers
at the Bank of England announced they do not want a high currency. Why
should it matter what they want? The next phase will see the US$ and
BPound both drop hard together versus everything on the planet. That
was the Euro2020 forecast, and it seems on the mark. IF THE 40% CITED
DISCOUNTS ARE ROUTINE ON LARGE US$ TRANSACTIONS, THEN A
SIGNIFICANT ARBITRAGE COULD PUT TREMENDOUS PRESSURE ON THE FOREX,
if it refuses to send the US$ down. We are in my opinion, and in the
opinion of a few key contacts, with two to three weeks away from major
financial earthquakes founded in the monetary foundation structures.
When they begin, all nonsensical talk of inflation versus deflation
ends. That talk will be replaced by questions like 'What happens to
the United States now? A debt default? Entry into the Third World? Who
will rescue us?' The answer is either NOBODY or THE CHINESE WITH HEAVY
PRICE.

Bear in mind the magnificent initiatives
to shed USTreasurys by China on their continuing world tour. They are
using USTBonds to acquire a sizeable slice of industry in the damaged
southern nations of the European Union, unloading $6 to 12 billion per
month. Also, the wreckage among the failed construction projects in
Dubai has resulted in huge USTBond positions held by Abu Dhabi bankers,
eager to unload much of their liquidation funds used as currency. Lastly,
the African and South American nations have sold a laundry list of properties
and projects to China, surely using USTBonds again. These poorer nations
will spend the currency as fast as they receive it, hardly set to build
a savings account. They live in true 'Hand to Mouth' economies.

◄$$$ USTREASURY AUCTION CAN BE
TIMED WITH USDOLLAR RISE. A RELAXED US$ CAN BE TIMED WITH END OF AUCTION
IN INCREASINGLY OBVIOUS FASHION. $$$ Tyler Durden at Zero Hedge noticed
an immediate connection on August 17th. He wrote, "Call
it a pure coincidence, but the second the Open Market Operation closed
at 11am, someone sold a boatload of dollars."
The Powerz lifted the US$ exchange rate for the USTreasury auction.
Right afterwards, the US$ fell. The USFed purchased $7.016 billion of
USTreasurys with the auction closing at 11am EDT. Given the decline
right afterwards in the US$ versus the Japanese Yen, it looks obvious
that the Bank of Japan and others pumped up the US$ overnight but then
dumped it suddenly. Some collateral damage to gold and silver occurred,
but it is surely temporary. See the Zero Hedge article and intraday
chart (CLICK HERE).

◄$$$ THE PRIVATEER BILL BUCKLER SENSES AN IMMINENT
USDOLLAR CRISIS, WITH CHINA AT THE CONTROLS. PROLIFIC USGOVT DEBT PUTS
THE USDOLLAR AT GRAVE RISK ON SEVERAL FRONTS. $$$ He calls it 'The Fast
Approaching US Dollar Crisis' correctly. He also believes in the strong
potential for China to demand that USGovt debt issuance be denominated
in Chinese Yuan denomination. He points out the foreign creditors are
under natural pressures to quit the credit supply to the United States
in US$ terms. An alternative protects the foreign creditor but at a
higher risk to the debtor, something eventually the USGovt might have
to accept. Right now, USTreasury demand is aided by hidden monetization
on large scales, both on the domestic front with primary dealers and
the foreign front with collusion among central banks.

Buckler wrote, "As already stated, China holds an
estimated 70 percent of its $US 2.13 TRILLION of currency reserves in
US Dollar assets, mainly US government bonds. That is about $US 1.45
TRILLION and that is why China has repeatedly asked for assurances from
the US that it will not try to inflate itself (by printing US Dollars)
out of the crisis. The US itself is on the horns of a dilemma. If
it tries to balance its fiscal budget with spending cuts, it sends the
US economy into a depression. If it does not, then the Treasury
has to keep borrowing to fund the budget deficit, adding to its debts
to the point where ALL lenders simply give up. When that happens, the
US Treasury will have to go over to the Fed's printer. The Chinese know
all this. That is why there are proliferating rumors in the background
that China will offer the US Yuan bonds, which
would at least remove the currency risk for China. The US
Dollar can then fall without affecting China, since it will
be repaid in Yuan. But any move in that direction would prompt the MANY
other nations which have lent to the US Treasury to demand that their
loans to the US be made in their own national currencies. That
will destroy the US Dollar as a reserve currency. All it
will take to bring this about is that the China/US talks in Washington
break up in mutual anger."

In the past, the USGovt has actually boasted of a policy
to inflate debts away by permitting inflation, and to pursue its debt
repayment in cheaper dollars. The practice is openly cited as prudent,
and has become an integrated policy, now regarded as dishonorable. It
forces the foreign creditors to take losses on the loan balance in real
terms, felt by them as a major betrayal. A double blow occurs when the
USDollar falls and USTreasury yields rise, in the foreign creditor accounts.
THE FOREIGNERS RESENT THIS POLICY TO THE EXTREME. Many effects come
from issuance of USGovt debt securities in foreign currency denomination.
The most clear would be a path created to end the reign by the USDollar
as global reserve currency. The displacement would be from the top at
the banking level, when other initiatives at the international transaction
settlement level are actively in progress to end US$ usage at the bottom
of the supply chain. See the Jackass article on the subject, entitled
"The USGovt Yuan Bond Threat" (CLICK HERE).
The direct consequences of USGovt Yuan Bonds would be vast, visible,
sudden, unstoppable, and deadly:

The USDollar exchange rate would fall with each
debt issuance

The loan balance in USGovt debt would rise with
a declining USDollar

The Yuan currency would be further established
as a global reserve alternative

Continued trade settlement in Yuan terms would
be enabled

Rise in entire cost structure to the USEconomy
from commodity pricing

The risk of USTreasury Bond default grows with
each passing new issuance.

◄$$$ PIMCO HAS FINALLY DISCOVERED
THE USDOLLAR IS DOOMED, BUT THEY MUST SUGARCOAT THE STATEMENT. THEY
ARE AN IMPORTANT BOND SUPPORTER FOR USTREASURYS, AND CANNOT SPEAK FREELY.
THEY ARE ACTUALLY PRISONERS OF BONDS, NOT MANAGERS OF THEM. ALSO JOSEPH
STIGLITZ GAVE A STERN WARNING ABOUT THE WEAK FOUNDATION OF THE USDOLLAR,
ITS REDUCED ROLE AS STORE OF VALUE, AND THE RISKS OF INFLATION. $$$

The Pacific Investment Management Co
(PIMCO) is the biggest manager of bond funds in the world. They
have made a public statement to the effect that the USDollar will weaken
as a result of massive money creation, from the numerous initiatives
to deal with the deteriorating USEconomy. PIMCO
portfolio manager Curtis Mewbourne expects the USDollar will drop the
most against emerging market counterparts, such as China and Brazil.
PIMCO fears a rout on the US$-based bonds. He
actually admitted that the US$ is fast losing its status as the global
reserve currency. One can translate his comments
into a public urging to sell into any undeserved US$ strength. He said,
"Investors should consider whether it makes
sense to take advantage of any periods of US dollar strength to diversify
their currency exposure. The massive amounts of US dollar liquidity
produced in response to the crisis [have harmed the integrity of the
currency.] While we have not yet reached the point where a new global
reserve currency will arise, we are clearly seeing a loss of status
for the US dollar as a store of value even in the absence of a single
viable alternative." Ouch! Direct slam!

Colleague and manager Bill Gross has
also warning the US currency will fall more than a minor amount. Gross
manages the $169 billion PIMCO Total Recall Return Fund, and has turned
negative on the USDollar. Gross advised US$
asset holders to diversify before the avalanche of action taken by central
banks and sovereign wealth funds to diversify on a much greater volume.
He cites the widening USGovt budget deficits and consequent supply problems
with USTBonds. The gloomy sentiments by Mewbourne and Gross at the prestigious
PIMCO are echoed by Warren Buffet. See the Bloomberg article (CLICK
HERE).

Nobel Economics Prize winner Joseph Stiglitz
is a Columbia University economics professor. At a conference in Bangkok
Thailand last week, he mentioned that support from countries like China
should ensure orderly discussions on a new reserve system. China, the
world's largest holder of foreign-currency reserves, and Russia have
both called for a new global currency to replace the USDollar as the
dominant place to store reserves. He criticized the USDollar in thorough
fashion, citing low value and high risk. He said, "There
is a need for a global reserve system. The
current reserve system is in the process of fraying. The dollar is not
a good store of value. Right now, the
dollar is yielding almost no return and yet anybody looking at the dollar
has to say there is a high degree of risk. As the balance sheet of the
Fed has blown up, as the deficit of the United States and the debt has
increased, people have asked the obvious question: will there be inflation
in the future? Right now we are facing deflation, but some time in the
future, there will be consequences. The liquidity is going to be spent,
but not necessarily in America. [Asian economies must] protect against
American-led asset bubbles." He referred directly
in his speech to Asian property and stocks as objects for inflated prices.
See the Bloomberg article (CLICK HERE).

◄$$$ THE USDOLLAR INDEX IS AT THE
CLIFF'S EDGE. TECHNICAL SIGNALS ARE ALL NEGATIVE. THE 77 LEVEL IS CRITICAL
SUPPORT, SOON TO BREAK. TECHNICALS, FUNDAMENTALS, AND PSYCHOLOGY ARE
ARE ALIGNED FOR AN HISTORIC BREAKDOWN. $$$ The currency intermediary
market gives the strong hint of a breakdown in the making, where high
volume dumps are taking place. Technical signals abound. The downtrend
channel halted the so-called bounce last week, as the US$ DX index cannot
recover. The bearish moving average crossover
was seen in mid-July, a loud gong for professional traders.
Cyclical indexes both show weakness. The MACD cannot seem to run favorably
since last December. The banking world is caught in denial, that the
USDollar must succumb to lower exchange rates. Last autumn, the deaths
of financial firms perversely lifted the US$. This time around, expect
the opposite to occur, since foreign opposition has turned into a revolt,
as they have removed the machinery for a US$ defense. A monetary crisis
comes very soon, one to be centered upon the USDollar. Its first line
of defense is the 77 level, which should fall soon. The next important
target is 72. It should be touched before the end of year.

◄$$$ BRITISH POUND STERLING ENTERS
THE DOORSTEP OF DEEP DECLINE. $$$. In the Competing Currency War, it
is a race to the bottom. The queer dynamic calls for a government to
avoid a currency rise, to create stimulus of the economy that induces
a lower exchange rate, only to cause a currency crisis. A higher currency
both hurts export trade and causes a more painful debt burden. So the
leaders actually attempt to push their currency down, eventually resulting
in capital flight by foreigners. The sequence is insane, but fits like
a political glove. It is happening in a classic sense in London. The
pattern occurs over and over and over again in history, with a
direct positive response to the global gold price when
several nations engage in the destructive simultaneously.
Hans-Guenter Redeker is the global head of foreign exchange strategy
for BNP. He said, "I am super-bearish on the
pound. The Bank of England has made it clear it cannot afford a stronger
currency." Weighing down the pound sterling
are attempts by Prime Minister Gordon Brown and Bank of England head
Mervyn King to revive economic growth with increased borrowing, outsized
deficit spending, and actual money printing. The UKGovt will sell a
record £220 billion (=US$363 billion) of
debt in the year ending March 2010, according to formal statements made
on April 22nd. That prompted Standard & Poors to warn in April that
Britain may lose its AAA credit rating. The collapse of the pound sterling
has been anticipated for some time, and next it comes. The intermediary
cash currency market is anticipating the deep devaluation. See the Bloomberg
article (CLICK HERE).

The best way to view the British Pound
is relative to the Euro currency, not the USDollar. The
next currency migration will push the Euro to lofty levels, while both
the US$ and BPound will suffer badly in severe devaluations.
The US and UK each have dreadful triple threats, with technicals (horrible
looking price chart), fundamentals (horrible federal & bank financials
and horrible economy), and psychology (horrible global sentiment) all
aligned for a historic breakdown. The BPound has moving averages that
appear ready to turn down in unison. The last week saw a move below
the 20-week MA. The target is parity at 1.00 for the BPound and Euro
currencies. In the next phase, their exchange rates should work toward
equaling each other.

UNITED KINGDOM FIGHTS THE ABYSS

◄$$$ THE NATIONAL DEFICIT IN THE
UNITED KINGDOM HAS JUST HIT RECORD HIGHS, A WEAKNESS REFLECTED IN ITS
GOVT CREDIT DEFAULT SWAP THAT INSURES AGAINST DEFAULT OF THE UK GILT
(GOVT BOND). THE UKECONOMY CONTINUES TO BE MIRED IN A RECESSION. DECEPTION
IS THE BASIS FOR HOPE IN BRITAIN, BASED UPON THE VAPOR OF OPTIMISM RELYING
UPON REDUCED DECLINES. ECONOMIC CONDITIONS WILL REMAIN STAGNANT FOR
SEVERAL MORE QUARTERS. $$$

Great Britain has suffered an £8
billion (=US$13.2 billion) budget deficit in the single
month of July, the largest for any month since records began in 1993.
Paul Mortimer-Lee is an economist at BNP Paribas. He said, "They
are completely disastrous numbers. With the economy in a parlous [perilous]
state, not much tax is being collected. The chancellor's estimate for
the deficit is going to be overshot by a considerable margin."
Like the USGovt, the United Kingdom Govt has a severe case of falling
revenue and rising costs, doling out crippling insolvency. Revenue
for the UKGovt till dropped significantly in July from a year earlier,
the steepest decline since records began in 1998.
The decline in federal revenue is on par with that for the United States,
joined at the hip with the same yoke of a wrong-footed monetary carriage.
Cash receipts from corporate profits fell
38% and value-added
tax (VAT) declined 34%. Households fares
slightly better, as personal income tax payments
dropped 15%. On the other side of the ledger,
UKGovt spending rose by 7.5%, with net spending on social benefits jumping
10% in direct response to the climb in unemployment to a 14-year high.
Hidden financial bailouts would make the spending figure much higher,
but that is a state secret like in WashingtonDC. The rampant destruction
to the government finances in Great Britain renders the British Pound
Sterling at great risk, income down and costs up. My forecast is for
a continued powerful decline against all currencies except the USDollar.
Both are due for painful devaluations. See the Bloomberg article (CLICK
HERE).

As a reflection of the perilous fiscal
condition for the United Kingdom generally, and the UKGovt finances
bound in the Gilt bonds, the Credit Default Swap has gone more expensive.
It insures the UKGilt from bond default, the cost of hedging against
losses. The UK total debt rose to the highest in a month after David
Cameron, the leader of the opposition Conservative Party, said high
borrowing levels put the country at risk
of default. He actually used the word 'default'
in his speech, surely to embarrass the dominant party, but to expose
the nation for its financially vulnerable condition. The UK debt burden
is the highest since 1976, when it requested emergency funds from the
Intl Monetary Fund to fight off insolvency. The UKTreasury last April
announced it will borrow £269 billion (=US$440
billion) more than previously forecast as conditions worsen. Cameron
had a meeting with Black Swan author Nassim Nicholas Taleb, where Cameron
said, "You run the risk of not being able to
meet your obligations. I am not predicting that it is going to happen,
but as government borrowing goes up and up and up, you start running
that risk."

Credit default swaps tied to Britain
rose 2 basis points to 62, according to CMA DataVision prices last Wednesday
in London. That is on par with a PIGS basket
case nation in Portugal, and more than double
that of Germany. The contracts cost 26.5
basis points on German debt and 63.5 basis points on Portugal debt.
The United States CDSwap cost hit a full 100 bpts long ago. One basis
point (one hundredth of 1%) on a CDSwap protecting $10 million of debt
from default for five years is equivalent to $1000 a year. See the Bloomberg
article (CLICK HERE).

The UKEconomy will not offer any help
to the government financial condition, not with a recession in progress.
Like the US and European Union, the second quarter showed about a 1%
pullback. Recovery will be a major struggle to bring about globally.
It is not imminent. The UKEconomy fell by 0.8%
in 2Q2009, the months of April through June. Expect no substantial
recovery for several quarters, since no remedy has been put into place,
and insolvency of the banks remains the key fundamental problem from
systemic shock. The decline for the manufacturing and financial sectors
is at record levels, never seen before. The statistical gimmicks managed
to make it look like an improvement was registered over the 2.4% GDP
decline in 1Q2009. The real figure to hang on is the total 5.6% GDP
decline since 2Q2009, the greatest fall since quarterly records began
in 1955. Hetal Mehta is senior economic adviser to the Ernst & Young
Item Club economic consultancy. A common theme was mentioned when he
said, "Recent hopes of recovery have run ahead of reality. With credit
still severely restricted, consumers and businesses continuing to retrench,
and world trade yet to pick up, it is hard to see any grounds for sustained
optimism at the moment." Desire and desperation have badly tilted
perception of reality.

A sequence of recent data produced more optimism than
economic activity. Data showed a jump in retail sales, a strong rise
in new homebuyer inquiries, a smaller than expected increase in jobless
claims, and a slowing rate of decline in manufacturing output. Such
'Second Derivative' signals (reduced worsening of data) are often baseless,
as a slower hemorrhage is not a good condition to be in. Horrendous
hemorrhage must at times moderate. The Society of Motor Manufacturers
& Traders said that car production was down 30% from a year ago,
but that was better than the 50% collapse for the first six months of
the year. Total vehicle production including commercial vehicles was
down 34.5% in June. The Q2 economic data figures were pulled down by
the construction sector, which posted a 2.2% decline. The sector is
down almost 15% from the same quarter last year, the biggest annual
decline on record. Their clowns in government have made the same baseless
promises of a Second Half Recovery that next must be retracted. Pressure
is squarely on Treasury Chief Alistair Darling, who had issued a forecast
of a return to growth by the end of this year. It was based upon
absolutely nothing but hope, and a deep desire to deceive, just like
in the United States. The National Institute of Economic & Social
Research expects another five years before income per head to return
the same level before the recession hit in early 2008. See the Yahoo
Finance article (CLICK HERE).

◄$$$ ENGLISH HOME REPOSSESSIONS ROSE
BY 50% AT THE B&B GIANT, UNDER THE UKGOVT AEGIS. DESPITE EFFORTS,
DEFAULTS AND FORECLOSURES WILL CONTINUE. EXPECT MORE ECONOMIC FALLOUT
AND MORE UNDERMINE TO THE BRITISH POUND STERLING FROM ENDLESS RESCUES.
$$$

Bradford & Bingley made a public
announcement two weeks ago, admitting a 50% rise in home repossessions
in the first six months of 2009, compared to a year ago.
At the end of June the bank had 961 homes under repossession, some 300
more than at the end of December. The state-owned B&B expects property
seizures to continue to increase, despite an improving national trend.
Some 21,102 B&B customers, almost 6% of its base, are over three
months in arrears or have suffered repossession. The UKGovt has pressured
lending institutions to display more leniency to struggling homeowners,
resulting in a decline in national foreclosures. The improvement is
likely temporary, seen in the last couple months. Like
with California, a torrent builds, only to be released in coming months
from pent-up supply.
Banks will do what they must when the political leaders leave the room,
and quit interfering with basic business commerce in the natural course.
In the real world of B&B, managing director Richard Banks warned
that repossessions would continue to rise throughout the year, a direct
consequence of the sharp rise in the number of customers who fell delinquent
in 2008. GOVT CANNOT HOLD BACK THE TIDE!

B&B is in a dicey situation since
nationalized last September 2008. Losses piled to £160 million
in the first half of 2009. The lender has set aside £270 million
to cover fraud and professional negligence from applicants for its failed
buy-to-let and self-certification mortgages programs. These were the
sanctioned speculative and application fraud
programs to further the supposedly beneficial
housing bubble. B&B claims to work closely with customers under
distress, and to exhaust 'all reasonable efforts' before initiating
the repossession process, called a last resort. The UKGovt has a big
stake since it took over the B&B giant. They poured £18.4
billion into B&B last September to replace the customer deposits
taken on by failed Abbey during the climax of the banking crisis. Failure
married failure. B&B was given £8 billion of working capital
in the first half directly from government coffers, or printing press.

The Council for Mortgage Lenders (CML)
said 11,400 properties were repossessed in 2Q2009 ending in June. That
marked a 10% decline from the previous quarter but still an increase
from 10,000 in 2Q2008. The number of loans over three months delinquent
was 270.4k at the end of June, up from 152.7k a year earlier, but up
only slightly from the 264.7k at the end of March. The
CML forecasts that 65 thousand people will lose their homes this year
and warns repossessions could rise again in the second half of the year.
CML's head of policy Jackie Bennett said, "With
unemployment rising and the economy still weak, the outlook will remain
challenging for the rest of this year and into 2010. But the data shows
that lenders are committed to helping borrowers manage their way through
temporary payment problems and to get their mortgage back on track over
time, avoiding possession where possible." They
will fight the tide of default with futility.

Shadow Housing Minister Grant Shapps
urged the UKGovt to undertake greater action. He said, "In
the first three months of this year, 4200 people approached local authorities
to seek help from Gordon Brown's delayed Mortgage Rescue Scheme, but
just six families throughout England
got any assistance. It is time the Government
stopped trying to grab quick headlines and brought in policies to help
vulnerable families." Sounds just like the
USGovt, with 98% hot air and 2% real action where needed. The US &
UK share the same problem, ridiculously lax irresponsible lending practices
contrasted against deep mortgage bond fraud. See the UK Guardian article
(CLICK HERE).

COILED SPRING FOR GOLD &
SILVER

◄$$$ RUSSIA ACCUMULATES A GIGANTIC
HOARD OF GOLD, SHROUDED IN SECRECY, PREPARING TO ASSIST IN THE CONSTRUCTION
OF THE NEXT GLOBAL MONETARY FOUNDATION. OFFICIAL DATA IS A PURE DISTRACTION.
$$$ Russia recently updated data on their official gold holdings as
reserve assets. Since October 2006, their official gold reserves were
at 12.5 million ounces. The Russian gold reserves now are at 18.3 million
ounces as of July 2009, for a stated increase of 600k ounces of gold
during the month of July 2009. Still, that is their biggest one month
increase in recent history. See the Russian Central Bank website data
(CLICK HERE).

Then the REST of the story. A gold banker
contact with direct past experience inside Russia during the 1990 decade
directed a comment after the Russian gold story emerged. He had contact
with several of the Yeltsin cadre. He wished to elaborate on the much
bigger story that comes from Russia pertaining to gold. A grand plan
is in place, one to fill the vacuum when the inevitable collapse of
the USDollar and USTreasury occurs. He wrote, "You
need to understand and know that the Russians do not disclose their
actual Pt, Au, Ag holding at Gochran. It is safe to assume that the
numbers mentioned are low-balling big time. Russia
and the Gulf States will provide the required precious metal for the
core of the new gold backed currency that will emerge after the collapse
of the dollar. This is all part
of a larger strategy that is poorly or not understood by pretty much
all so-called experts. There have been very few people who have had
a chance to see what the Russians store at Gochran. It is mind bending.
It is like the Kremlin and the White House. The White House is a shabby
cottage compared to the Kremlin." Note Pt,
Au, Ag mean platinum, gold, silver.

◄$$$ THE GOLD PRICE PRESSURE IS
BECOMING ENORMOUS, WITH A BREAKOUT SOON COMING. THE TARGET IS 1250 TO
1300. A GOLD MOVE UP SHOULD LEAD THE USDOLLAR MOVE DOWN, AS LEADERSHIP
SHIFTS. A GLOBAL MONETARY CRISIS IS IN PROGRESS. $$$ The pressure is
building. Global revolt is loud and shrill. Gold should take back the
monetary leadership mantle of direction, respect, and prestige, as it
should during a monetary crisis. A major reversal now spans two years
time, which usually means the breakout will be historic, one for the
ages. The pennant pause pattern dictates that resolution should occur
without much additional passage of time. All signals point to a raucous,
unstable, and tumultuous September and October.

◄$$$ THE SILVER PRICE IS DUE TO
FINALLY APPROACH 18-20 VERY SOON. IT WILL NEXT RECOVER ON THE SILVER/GOLD
RATIO. ITS PRICE CHART LOOKS VERY FAVORABLE. SHORTAGES ARE ACUTE AND
UNADDRESSED. $$$ The uptrend channel displays positive energy. The moving
averages remain aligned, offering strong support. The engineered USDollar
bounces cannot muster a rebound or recovery. But they do minor damage
to the silver price. A major reversal is still in progress, sure to
lift the silver price toward the 20 level. Shortages of silver are evident
at numerous national coin mints. Furthermore, the lower industrial metal
prices (nickel, tin, zinc) have resulted in less silver output as byproduct
to mine operations. Silver is much less a target in mine operations
than gold, and thus comes as byproduct from other industrial projects.

See the strongly enthusiastic article for silver by
Adam Hamilton of Zeal Intelligence entitled "Big Autumn Silver Rally"
(CLICK HERE).
He makes some excellent points about the restoration of the Silver/Gold
Ratio (SGR), which broke down last autumn during a panicky crisis. What
was once a 95% correlation in price movement between the two precious
metals fell to 53% during the autumn months. So far in 2009, the correlation
has climbed back to 82%, a surefire recovery that signals a bigger silver
move in conjunction with gold, from basic catch-up. He estimates that
if the ratio returns to its recent historical 55, then silver should
move above $17/oz without any notable rise in the gold price. Even higher
prices are due to come, hinting of a $20 price.

Hamilton wrote, "All this is exciting for silver,
but it doesn't offer clues on timing. But other factors are coming into
play that I suspect will lead to a substantial acceleration of this
in-progress and inevitable SGR [ratio] reversion in the coming months.
Silver has incredible potential for one of its biggest
autumn rallies ever witnessed. Investors and speculators
long this metal and its elite producers would see huge gains in such
a scenario. Silver ultimately follows gold, so nothing will get traders
as excited about silver as quickly as a major gold rally. Provocatively,
we are just entering the seasonally strongest time of the year for gold
prices. On average between 2000 and 2008 prior to the panic,
gold rallied 14% between August and February. Off of a $950
average gold price, a similar move this year would carry gold above
$1075. Gold decisively over $1000, highly likely soon technically, would
ignite all kinds of buying in the tiny silver market."

◄$$$ THE HUI PRECIOUS METAL MINING
STOCK INDEX REMAINS HESITANT. IT IS POISED FOR A LEAP TO NEW HIGHS FOLLOWING
THE GOLD BREAKOUT. $$$ A notable uptrend channel has formed, offering
support and continued pressure on price. Notice three key things. The
moving averages are both rising, offering excellent support during downdrafts
from illicit interventions. They crossed at the turn of June, a strong
bullish signal for this entire season. And in the last week shown, a
positive Doji Star is seen, with open and close price equal. The HUI
stock index is heading much higher, to new highs, but it is cautious.

◄$$$ THE CHINESE GOVT HAS OPENED THE
PATH FOR SILVER INVESTMENT. THE CANADIAN GOVT HAS ALSO BEGUN TO PROMOTE
COINS FOR THE VANCOUVER 2010 WINTER OLYMPICS. THE ROYAL MINT OF CANADA
HAS DOUBLED ITS PRODUCTION OF COINS TO MEET BURGEONING DEMAND. $$$

The Chinese Govt has added a silver lining
to the available investment options, in bullion form. Silver
bars are available to the Chinese public in 500 gram, 1 kilogram, 2
kg, and 5 kg with a 99.9% purity. The silver
price has fallen relative to gold resulting in an attractive ratio.
In the last two years, the price ratio of gold to silver has risen from
50 to over 70 times. Silver is vastly under-valued in the opinion of
many analysts, the Jackass included. The Beijing Caibai Shopping Mall
is the first to offer silver bullion as an investment opportunity. The
price for the first batch of the bullion is intentionally low, near
the cost of the raw material. The investment minimum is also reasonably
low, suitable for the general public. Silver is an order of magnitude
cheaper than gold by weight.

Across the great Pacific, the Royal Canadian
Mint has launched the third and final lot of Olympic Game coins. They
are the world's first series of bullion coins commemorating the Olympic
competition. The Mint's Ottawa facility will produce around 50,000 gold
coins for the 2010 issue. The quantity of silver coin output will be
determined by demand. Investor and collector demand to the first two
issues of its Vancouver 2010 Olympic Winter Games Maple Leaf bullion
coins has been strong, in gold and silver. The Vancouver 2010 Olympic
Winter Games arrive in only six months. The Gold Maple Leaf bullion
coin is one ounce of 99.99% pure gold and bears a $50 face value. The
Vancouver 2010 Olympic Winter Games Silver Maple Leaf bullion coin is
struck from one ounce of 99.99% pure silver, and bears a $5 face value.
The reverse of the coins features an ice hockey player in full stride,
flanked by two maple leaves. Both coins are now available through the
Mint's extensive network of bullion dealers. See the Commodity Online
article (CLICK HERE).

The Royal Mint of Canada has doubled
its output to 16,910 ounces in 2Q2009 from 8030 ounces from the same
Q2 a year ago. This data comes by means of
queries by Bloomberg News under a Freedom of Information Act request.
Production in the first half of 2009 leaped by 86% to 45,406 ounces,
according to the same source. Demand is soaring, and the motive is surely
not numismatic beauty. It is protection against failed currencies. See
the UK Telegraph article (CLICK HERE).

Forty years ago in 1959, any Chinese
citizen caught with gold in possession was thrown in jail. But now the
Chinese Govt is taking radical measures to change widespread indifference
and lack of understanding for precious metals as an asset class. The
year 2009 is the FIRST year that the Chinese public is permitted to
own physical gold or silver. Officials are now trying to drum gold &
silver as an investment from city billboards. Beijing
leaders realize that public demand aids their strategy to pressure the
USDollar and unseat it from the global catbird seat.
Banks offer an array of precious metal investment options to the pubilc,
far more than are offered to Americans. As Simon Black of the International
Man says, "Instead of Maoist propaganda, though,
they are attempting to change the entire
perception of gold & silver in the Chinese public.
Simply put, the Chinese government is trying to trigger
a national gold craze, and it is
working. The Chinese public now has gold trading platforms on steroids.
You can buy silver bullion or gold bars at any Chinese bank in four
different sizes. Wealth management products tied to gold are skyrocketing
in popularity, and the public can now instantly buy, sell, and trade
gold 24 hours a day in five different forms with different eight types
of services."

◄$$$ THE WORLD GOLD COUNCIL RELEASED
ANNUAL DATA ON THE GOLD MARKET AND INDUSTRY. INVESTMENT DEMAND IS WAY
UP BUT CONSUMER (JEWELRY) DEMAND IS DOWN, A TRADITIONAL BULL MARKET
SIGNAL. $$$ George Milling-Stanley is President of the WGC. He recently
divulged the results of their annual study on gold during a television
interview. Global investment demand in 2Q2009 was +46% annually. Net
retail investment growth was +12% annually and +23% quarterly (Q2/Q1).
Total global demand in Q2 was 222 metric tonnes, for a -9% change. However,
consumer demand fell by 22% in Q2 versus a year ago. This is the key
signal distorted by the USGovt-sponsored publicity. Such
consumer jewelry demand decline combined with rising investment demand
is the most reliable signal of a powerful gold bull market from past
history. Chinese consumer demand was +6%,
softening the decline.

◄$$$ THE EXCHANGE TRADED FUND FOR
SILVER HAS BEEN EXPOSED AS FRAUDULENT ALSO. THE S.L.V. FUND CONTAINS
MANY DUPLICATE SERIAL NUMBERS ON RECORD, WHICH INDICATES FRAUDULENT
ACCOUNTING TO CONCEAL THEIR LEASED SALE AND REPLACEMENT BY CERTIFICATES.
$$$

The preface should hammer home the point that
shares of the Exhange Traded Funds are used as settlement on these same
COMEX futures exchanges, a fact for both the gold and silver funds managed
by the gold cartel. ETFund shares (SLV for silver, GLD for gold) have
been routinely used as settlement in lieu of physical delivery of a
commodity. Without doubt the corrupt practice affects the silver price
the most, as silver has the most concentrated and leveraged short position
of any COMEX tangible product. The expedient practice of assigning ETF
shares for use as settlement instead of physical delivery, compounded
by the increasingly scarce global silver supply considerations, is a
consequence of fifty years of industrial consumption in addition to
colossal systemic fraud. Since ETFfund share settlement is openly known
toward on the futures market, careful accounting is imperative so as
to ensure open information in proper price discovery in accounting confirmations.
The paper promises to the COMEX should contain a physical asset in support
of the paper.

The Project Mayhem Research has detected
multiple anomalies in the Silver ETFunds. What an intriguing name for
a project! They conducted a computerized analysis of serial numbers.
Project Mayhem has released its first working paper on statistical and
factual anomalies in silver ETFs. The conclusion
is distrubing, they say, more like confirmation of deep fraud in my
view. The exposure on these corrupt funds run
by Wall Street and London will surely grow over time. Their research
indicates prevalent data anomalies in the holdings of the silver ETFunds
and possibly even fraud within the certificates.

The Project Mayhem wrote, "During
our research into the inventory lists of the iShares SLV and London-based
ETFS physical silver funds, we discovered multiple anomalies which cannot
be easily dismissed. These included the
presence of internal duplicates, rough internal duplicates, weight duplicates,
statistical clustering, and cross-reference duplicates.
Taken together, these anomalies are cause for concern, and we suggest
that more capable teams conduct further research into these issues,
as they effect price discovery within the precious metals market, as
these ETF shares are being used for settlement
and possibly price suppression on the COMEX.
If these problems are caused by accounting errors, they are disturbing
and perhaps profoundly incompetent, and we suggest both these funds
should have their senior management replaced. In our opinions, the only
way for all of these anomalies to occur together as noted in this paper,
is via systemic fraud
or gross accounting error bordering on jaw-dropping incompetence. Unfortunately,
our private considerations are for the former, especially considering
'revisions' published to the ETFS bar
list after the appearance of Mark Anthony's July 14th 2009 article on
Seeking Alpha regarding possible ETF fraud.
The ETF securities bar lists were changed after the Anthony's discovery
of the duplicate bars in the Great Wall brand. To
us, this suggests criminal activity.
We suggest immediate future research by others to investigate these
findings." The fraudulent paper certificate
accounting was discovered, was exposed, and was covered up. The regulators
are nowhere to be seen. They are bought & paid for harlots, probably
partners in crime. Hats off to Tyler Durden and his Fight Club Team
for great investigative work. See the Zero Hedge article (CLICK HERE).

◄$$$ GOLD IS VERY CHEAP, OFFERED
AT DEEP DISCOUNT. MONETARY INFLATION IS ITS WAVE TO RIDE, WHILE THE
WEAK USDOLLAR IS ITS TAILWIND. SOON STRONG PRICE INFLATION WILL GIVE
IT PROTECTION AND MUSCLE. $$$ It is peptalk time!

As the global currency system continues
to fracture, it will need to be replaced. Gold offers protection at
the institutional level, the corporate level, and the individual level
in a unique stable and subtle way. Just because the gold price is near
the $1000 mark per ounce, some regard it as expensive. It is cheap.
Given the insane multiples in increased money inside the United States
and globally in the last 3 to 5 years, the gold price has merely doubled.
If one factors in credit derivatives, the multiples of monetary growth
are even higher. The gold price SHOULD be at
least $2000 per ounce now, and even approach $3000, but it is held down
with brute force in clear criminal fashion that will not be possible
to continue. Investors must not view gold as
an inflation hedge. They accept it at an 80% discount in price. They
will realize wild gains as the world struggles to install a new monetary
system. The current system has failed and will continue to fail to all
to see in a global tragedy. The banks need gold desperately in order
to create a monetary foundation that is totally absent. A
banking system remedy cannot come without such a new foundation.
The banksters must steal the gold, confiscate it, or pay for it. It
is my belief that any confiscation attempt will fail due not only to
public rebellion but to global rebellion outside the US-UK Sphere, thus
exposing its true elevated value. Their broken bank power structure
will also be exposed, when the USDollar and British Pound decline sharply.
We in the Sound Money armada eagerly await the proper pricing of gold
bullion.

The purchase of gold and its inclusion
in a portfolio is NOT defensive. Gold is real
money in a time when a growing segment of the
population struggles to conceive of what money is. Officials in power
have no idea! Regard gold as authentic when all paper-based investments
lack a foundation. Other commodities like crude oil (or copper ore,
healthy forest, productive industrial plant, active farmland) find value
in defensive manner due to their tangible nature, often called hard
assets. They are all offered at extreme discount if priced in USDollar
terms. The best advice is not to be concerned about precious metal prices,
since presented on the paper discovery corrupt billboard. Precious metal
is the ideal store for of value, the reliable standard of value, and
accurate measure of value. One can actually say that prices as listed
on the exchanges are totally irrelevant. The
USDollar has been given a death sentence, and its removal must take
its course. Its structural lattice work is
crumbling along with its broken levers and cut cables, as time, gravity,
and assaults will bring it down. The USDollar
is linked directly to the grandest corrupt fortress ever witnessed in
mankind's history. Its abuse has encouraged
a broadbased revolt that grows monthly. Gold, silver, and platinum will
see multiples of today's recognized value, when the global monetary
structure continues its degradation and soon crumbles.

◄$$$ JIM SINCLAIR COVERS THE GOLD
& USDOLLAR WORLD IN A CRISP EFFICIENT MESSAGE. THE UNITED STATES
IS AT WAR WITH CHINA OVER THE US$ AND GOLD. THE USDOLLAR WILL SURELY
FALL TO NEW MULTI-DECADE LOWS. HE FORECASTS THE GOLD PRICE WILL SURPASS
THE $1000 MARK THIS CALENDAR YEAR. $$$

China feels slighted for its accomplishments
within the global economy. China does indeed have alternatives to the
USDollar, and is showing they are in no way captive, as they gobble
up foreign assets. They have established the China Trade Bank, opening
offices globally. Also the China-Africa Fund has served as a conduit
for further investment. The Chinese Govt is the principal guarantor
of numerous projects. The Western gold cartel
must now fight against the Chinese, an entire nation, a certain lost
venture. China is squarely targeting the USDollar, the obvious weakest
link in the US-UK fortress. Sinclair compares
the $800 billion USTreasury Bonds held by the Chinese as reserves against
the $12 trillion badly spent by the USGovt, so as to expose the vulnerability
on the US side. He expects if the Chinese lose $400 billion, they will
gain much, like coming out the strongest national economy in the world.
China will lead the global movement to a super sovereign currency, whose
makeup will resemble the DX index but with a touch of gold for fun in
his words.

Sinclair attributes no value to any new
proposed Amero currency, since paper cannot replace paper. The natural
sequence of monetary evolution is for a debt currency to give way to
a commodity currency, and vice versa. He thought permitting the death
of Lehman Brothers was a grand error during a transition in presidencies
(a perception off target that ignores the $138 billion slush money handed
to JPMorgan). He believes a gold rally over the $1000 resistance level
is due this calendar year (very soon), and the key for the breakout
is the USDollar. The US$ DX index will eventually
fall below 72 and plumb toward 62 (maybe lower), leading the gold rally
to rocket to new highs. He is critical of Wall
Street for their arrogant adherence to management of perceptive economics.
My opinion is that such peceptive controlled
economics is a chapter taken directly from an Orwellian world.
He said "Gold will go to $1650 per ounce, and
not a force on earth can stop it" with a likely
speed bump at $1250. He regards the foundation for the gold bull market
to be a) the extreme levels of debt, b) the extreme levels of credit
derivative overhangs, c) their naked issuance, d) increasing levels
of debt failure, and e) the rotation of state budget crises. No solution
will come since the foundation of credit derivatives will never be properly
addressed, in his view. So protect yourself with gold. He likes gold
coins. Listen to the GoldSeek radio interview (CLICK HERE)

◄$$$ EUROPEAN UNION MEMBER NATIONS
REVISE THEIR GOLD SALE ACCORD, A BULLISH DEVELOPMENT FOR THE GOLD PRICE.
BETTER YET, THE LIST OF NATIONS UNWILLING TO SELL MORE GOLD GROWS. ON
A NET BASIS, CENTRAL BANKERS ARE BUYING MORE THAN SELLING GOLD, WHEN
COUNTING RUSSIA AND CHINA. $$$

The heads of the central banks in the
European Union met in late July to sign an agreement for a new 5-year
accord on official gold sales. They will sell 2000 metric tonnes or
a maximum of 400 MT per year over five years. The previous 5-year accord
limited their insane reckless gold sales to 2500 metric tonnes or a
max of 500 MT per year. The old Washington Accord was set to end on
September 27th. They wish to slow the pace of their monetary destruction,
and reduce the speed limit as their bank locomotives go over the cliff.
Gold bullion in vaults is the only legitimate
collateral in their banking system, which is in tatters, yet they view
it as moronically an income source. It is as
mindless and disastrous as burning the wooden support beams for the
entire house for heat in winter. The Swiss showed defiance, and broke
from the ranks. They refuse to conduct any more official gold sales.
The Swiss National Bank said that it had no plans for any further gold
sales in the foreseeable future. Their statement read, "With
gold holdings amounting to 1040 tons, it holds a substantial part of
its currency reserves in the form of gold."
They appear to honestly report their gold reserves on a net basis, after
subtracting the amount under lease.

In an unexpected but bizarre fit of monetary
wisdom, the 19 central bank heads in Europe called for gold to be the
World Currency Reserve. The Swiss Govt already has in law that the Swiss
Franc currency must be backed by at least 33.3% gold bullion. A
confirmation came that the United States shipped 5000 metric tonnes
overseas in 2007 and 2008. The gold transfers are perversely called
exports, which has helped enormously to reduce the trade gap.
Be sure to know that the accounting practice to close the loops was
not honored in the 1990 decade. Back then, the lease of gold was not
called an import. The destination is undoubtedly foreign central banks,
to Europe in the return of leased gold, to the Persian Gulf nations
also to return leased gold, and to China for their gold accumulation.
See the USEconomy trade gap improvement, surely due also to severe recession
and steep fall in import consumption.

In all, 19 member central banks, including
the European Central Bank, signed the agreement. The other banks include
those of Belgium, Germany, Ireland, Greece, Spain, France, Italy, Cyprus,
Luxembourg, Portugal, Slovenia, Slovakia, Malta, the Netherlands, Austria,
Finland, Sweden, and Switzerland. The statement also recognized the
International Monetary Fund plan to sell off gold. Recognition is important,
since the IMF does not own any gold bullion. It holds pledges from individual
nations. The statement read, "The signatories
recognize the intention of the IMF to sell 403 tonnes of gold and noted
that such sales can be accommodated within the above ceiling."
So IMF sales are wrapped within the European member bank sales. See
the Earth Times article (CLICK HERE).

The new central bank sales agreement
is very bullish for gold. Two possible conclusions
come to mind. First, these central banks might have much less gold to
sell, hence they must reduce gold sales regardless of any high price.
Second, they might anticipate the price of gold to go much higher. Consider
it the Gordon Brown backlash. The biggest gold fool on the planet is
this man, who was rewarded for his colossal stupidity and mismanagement
by being elected Prime Minister. That the UKGovt should hurtle over
the cliff toward default should come as no surprise. Even if the reported
gold reserve figures of these central banks are taken seriously, European
central banks hold just over 10 thousand tonnes of gold, with almost
40% of that amount held by Germany alone. Germany
has been adamant that it will not agree to sell any of its gold.
The suppression of the gold market is the Great American Game, intended
to keep the world's reserve currency stable and to help preserve all
the floating paper currencies. Gold has always been the ultimate 'barometer'
of the global monetary system, its inflation gauge. Sir Alan Greenspan
was much less ambivalent in his willingness to subvert markets. When
asked how he would respond to a global monetary crisis, his famous reply
was, "We stand ready to lease gold in ever-increasing
amounts." The leasing of gold is a central
bank euphemism for dumping gold onto the market. His
project of suppressing the gold price will inevitably result in blowing
up the entire global monetary system, just like his offloaded risk project
abusing credit derivatives and mortgage bonds killed the US banking
system. Give it time. The climax events might
begin soon.

Julian Phillips provides valuable information
to highlight how member nations in the European Union sold less than
the limit, while some stopped altogether with no intention to continue.
The New Central Bank Gold Agreement stipulates
a limit on gold sales, not a requirement. Switzerland
has joined Italy and Germany to make it clear they will sell no more
gold bullion. Furthermore, Portugal, France, and Austria sold less than
their permitted limit, with no formal statement that demonstrates any
commitment to the program. The Intl Monetary Fund is lined up to benefit
from these EU gold sales. They can follow up with sales in order to
raise desperately needed funds. One should expect
the impact on the gold price to be minimal from IMF sales since
very likely to be single lot sales, high volume sales with a transfer
of owners, not staggered and scattered market events. Given the behavior
of Russia and China in accumulation phase, the net effect of central
bank activity is bullish. In aggregate, central
banks are buying more than selling gold.
See the Phillips article entitled "New Central
Bank Gold Agreement" on Kitco (CLICK HERE).

◄$$$ GERMAN BUNDESBANK GOLD HOLDINGS
ARE DELINEATED, BY A DIRECT MESSAGE. $$$ A European gold banker contact
inquired directly to the German Chancellor's office for a definitive
answer on the status of German gold. His answer was received. Here are
the numbers: 3800 MT = 122.170.000 Unzen x US$ 946.2 = $115.597 billion
= Euro 81.395 billion (11.August 2009 / 5 Uhr). Translate the response
as making reference to 3800 thousand metric tonnes, or 122 million ounces
gold as of 5pm that day.

COMMODITY MARKET & BARTER
THREAT

◄$$$ AN IMPORTANT BARTER SYSTEM PLATFORM IS SOON
TO BECOME A REALITY. IT BYPASSES THE US$-BASED SETTLEMENT SYSTEM, ELIMINATES
THE BANKERS, MATCHES BUYER & SELLER EFFICIENTLY, AND GREATLY REDUCES
THE POTENTIAL FOR FRAUD. FEEDBACK IS ENCOURAGING ALREADY. $$$

The following information comes from a person closely
involved in development of the barter exchange itself. The Jackass is
grateful for the source of important information. Welcome the XXX-XX
Excess Capacity Barter/Counter Trade & Commodity Exchange, whose
formal name is withheld. That is a mouthful, and its punch matches its
lengthy name. The XXX-XX is to be a global non-monetary marketplace
with independent settlement outside the currency world, and therefore
beyond the reach of the bank nazis. As a preface, catch some feedback
after the posted July reports that introduced more detail on the barter
exchange concept coming to fruition, certain to undermine the USDollar
at the grassroots level. A disruption to the current global trade system
is vividly clear. The note came in the days after the reports were posted,
from one fretful player. It read, "Jim, subscribers to your July
Hat Trick Letter are part of very powerful groups in the US and elsewhere.
They agree with your assessments and you scared the shit out
of them with the mentioning of the barter platform and the
new alignment. Especially Americans are already facing the problem of
being shunned in their international business transactions and are eager
to find a way 'to earn their way back in' as junior participants. This
is an interesting, but not unexpected, development."

My reaction was to find it EXTREMELY interesting. My
interpretation is that a TOPDOWN approach to displace the USDollar (from
banking functions, reserves management) will not work so easily or quickly,
since the upper echelons are where the bankers in the United States
and United Kingdom maintain control. So the BOTTOMUP approach to displace
the USDollar (from international trade settlements) will indeed be the
route that proves more effective. Intrigue has entered the room, as
power structures are battling each other, evidence being the note above.

The XXX-XX exchange offers some immediate transparent
benefits. Its simplicity will enable it to penetrate and grab sizeable
market share in global transactions. So much resentment exists in
the current system that enables a free unlimited credit and counterfeit
access for the USDollar and its custodians. The XXX-XX offers, in
the words of my contact, the following: "1) Freedom and total transparency,
allowing all serious players to become members on the exchange and engage
into multiple party, trans-national transactions without having banks
and politicians to maintain a stranglehold on business. 2) It is a fair
real marketplace where the interlocutors and trading partners set the
value for their capacities, goods & services, and commodities that
are being settled in a non-threatening and non-hostile environment.
3) Corruption is almost eliminated since hardly any cash money is involved."

The XXX-XX will be launched in Europe this autumn,
and will contain a minimal monetary component. Its structure will
contain a 10% monetary foundation. The system will permit producers
and buyers to be matched up, where both are vetted and approved. Excess
capacity can be converted to working capital by reciprocal trade, by
means of efficient standardized systems that reduce operating costs
and utilization of capacity as proxy for cash. The supply network is
not connected to the established grid. Participation is open for now,
but later it will be restricted. Prices are negotiated, with settlement
and clearing conducted on the platform. Many very knowledgeable and
experienced people are designing, planning, and building the exchange,
which contain complicated support systems. Producers are paid upon delivery
in source currency to source procurement. Participants to the exchange
will encourage their business partners to join the platform, either
by relationship trust or by efficiency motive. Super secure servers
will control the transactions expected to be in the tens of billion$
by the end of the first year. The initial XXX-XX platform equity
is €1 billion, or more
precisely an equivalent one billion euros in GOLD.

The liquid unit of exchange is to be called the Non-Monetary
Unit (NMU). The transactions will be conducted on a private internet-based
exchange with trades completed on the exchange Clearinghouse. The NMU
serves as credits for each party among members of the exchange. The
Clearinghouse controls governance and risk management of the NMU, and
provides collective backing of the NMU to ensure its liquidity. The
NMU is a trading unit vehicle for exclusive usage to transfer value
from products or services among members. The NMU is a standard unit
of exchange, a non-sovereign private trading unit, with no fixed external
value. The exchange will offer members consulting services to develop
trade strategies. Members will be in a position to exploit under-utilized
and available capacity, goods, services, and commodities that might
otherwise perish or go unsold.

One should regard the system as cutting deadbeats out
entirely in the global marketplace, nations and regions that fail to
offer items of value in return for valuable products received. For decades,
the United States has exchanged paper debt instruments in return for
finished products and refined commodities, both produced by sweat and
work. During this time, the USEconomy has systematically removed much
of its own industrial capacity. The US leadership crew has often boasted
that the US has a great racket going, but it will end very soon, perhaps
with shocking suddenness. My interpretation has been consistent that
the US will enter the Third World as the USDollar is displaced, as the
USGovt loses control, and as the structures in support of both crumble.
The process is furthered by the barter exchange systems, and the
XXX-XX could become a major factor. It will spawn a lower level
system of exchange within another open Internet platform, whose marketplace
should give Google headaches in coming months and years. Yahoo and E-Bay
must be on the watch also. In time the Hat Trick Letter subscriptions
could be sold on this Internet platform that allows for secure transaction
management, giving the Jackass credits at participating hotels, department
stores, and airlines. All in time. The entire new exchange system and
its platforms are extremely disruptive and a grand attack at the very
flanks of the global US$-based transaction and banking system. An old
way of conducting honest business is being re-launched with 21stcentury technology, namely BARTER.

For just a hint of this new trend of barter, check
out Great Britain. It is just the beginning, as people respond to banker
betrayals and ruined money. The Economy Collapse website reports on
barter. They wrote, "The global recession has led many countries
to come up with new ways of handling their finances, but residents of
one European country have gone back in time for their inspiration. People
in a number of cities in Britain are swapping goods without
using any money at all." See the article and video clip
(CLICK HERE).

◄$$$ GLOBAL TRADE CONTINUES TO
SLOW, AS JAPAN HAS REALIZED A STUNNING DECLINE. CHINA COMPENSATES BY
UNLEASHING A CREDIT BUBBLE THAT COULD END BADLY. $$$ Zero Hedge provides
a disturbing portrayal of Japan and the collapse of its export trade.
Japan now has a small trade deficit of $733 million globally, year to
date. They wrote, "The Japan External Trade
Organization has released its latest trade figures, which paint a grim
picture for foreign trade by the world's second largest economy. Year
to date imports have dropped by 31.9% to $252.9 billion, while exports
have plunged 36.8% to $252.2 billion.
Most stunning is the disclosure on trade flows with the United States:
exports to the US have dropped by 43.5%
to $40.5 billion, resulting in Japan's
largest positive trade balance. Another development is that China has
now replaced the US as Japan's primary trade destination… To
make up for the estimated 20% decline in Chinese exports, and in order
to 'maintain' the artifical minimum 8% growth of the economy, the Chinese
bank has to redirect consumption to internal sources of demand, which
can only be achieved by providing virtually free credit. The problem
with that is that practically all of
mainland China has taken the free cash and invested it in the stock
market. The eventual collapse of this
fake liquidity transfer will be one for the ages."
See the Zero Hedge article with a table of Japanese trade data (CLICK
HERE).

◄$$$ BRAZIL & MEXICO MOVE TOWARD
A FREE TRADE DEAL. $$$ The economies of Brazil and Mexico generate more
than 70% of all economic activity in Latin America. The Mexican President
Felipe Calderon supports the concept of free trade with Brazil as proposed
by the business sector that executives have pushed forward as part of
a commercial accord for the two nations. Calderon made a three day visit
to Brazil, touring installations of the Brazilian state-run oil company,
meeting with Brazilian President Luiz Inacio Lula da Silva. This statement
means trade tariffs will not be imposed on such trade. Watch for the
currency used in such trade, likely not to be the USDollar. See the
Yahoo Finance article (CLICK HERE)

◄$$$ US SOURCES ARE PURCHASING
STOLEN MEXICAN OIL IN THE MAINSTREAM. TRAGICALLY, MY FORECASTS OF MEXICO
DISINTEGRATION ARE OCCURRING, A FAILED STATE.
THE MEXICAN OIL INDUSTRY HAS BEEN HIJACKED IN OPEN WAYS AND HIDDEN WAYS.
DRUG CARTELS FILL A POLITICAL POWER VACUUM. $$$

Refineries in the United States have
bought million$ worth of crude oil stolen from Mexican Govt pipelines.
The oil looks just like the real thing, because it is. Product is smuggled
across the border for easy sale, admitted the US Justice Dept. The Mexican
drug cartels have expanded their reach, now in my opinion to reach the
most powerful entities inside Mexico, including their government, army,
police, banks, and corporations. The criminal
organizations, often part of drug cartels, tap into remote pipelines,
sometimes building pipelines of their own, to siphon off hundreds of
million$ worth of oil each year. Even the monopoly
Petroleos Mexicanos (PEMEX) acknowledges the criminal practice and lost
federal revenue. At least one US oil executive has pleaded guilty to
conspiracy in such activity, wherein the oil firm purchased at a discounted
price. In early August, the US Homeland Security Agency returned $2.4
million to the Mexican Govt's tax offices to settle a case.

Stolen Mexican oil is often transported across
the border in trucks and barges, then sold within the United States.
In Mexico, reports indicate the Zetas, a violent drug gang aligned with
the Gulf cartel, used false import documents to smuggle at least $46
million worth of oil in tankers to unnamed US refineries. Mexican authorities
have frozen 149 bank accounts this year in connection with this ring,
as the case continues.

The PEMEX oil output has declined
by 7.5% in the first half of the year. The
thefts are a devastating blow to PEMEX, which has fallen victim to at
least 190 different known thefts, almost half in the Gulf state of Veracruz
alone, which has entered chaos. Not only is
output down, but theft is up, thus reducing revenue to the MexGovt.
The federal revenue machinery has entered a Black Hole, with momentum
growing. So far this year, crude oil theft is up 10%, as cases have
been confirmed in 19 states, up from 13 in 2008. Oil revenue is Mexico's
leading source of foreign income. It finances about 40% of their national
budget. President Calderon publicly cited the theft, now a national
crisis, hardly a scandal, more like a death blow. He said, "These
are Mexican resources, and we do not have to sit back or turn a blind
eye. This is our national heritage and we must defend it. [The cartels
and other bandidos] are basically working day and night, seeing how
they can penetrate our infrastructure." Highly
sophisticated thieves actually are using stolen PEMEX equipment, as
they build tunnels, construct syphons, and draw supply from unguarded
locations remote parts of the country. Even PEMEX officials do not know
how much crude oil is stolen. Blame is given to the drug cartels operating
and entrenched in Northern Mexico, working in competition with crooked
PEMEX agents, sometimes with their agents. The Mexican nation is at
war with itself, as the federal govt is battling its own military, its
own police, its own oil company, its own banks, and the powerful drug
cartels operating inside the nation. The US State Dept has entered the
conflict, along with the Drug Enforcement Agency and the USMilitary.
Equipment from the USGovt is denied the Mexican Govt in many cases for
assistance, since nobody trusts anybody. The US is blamed for supplying
weapons to the cartel indirectly. MEXICO IS
ESSENTIALLY IN A CIVIL WAR AND IN THE PROCESS OF A FAILED STATE, a correct
forecast made in summer 2007 with its basis the depleted and stolen
oil supply. The crime wave committed against
neighbor states like Arizona is an epidemic, mentioned in previous reports.

Crude oil is fungible, without identification
or markings. One cannot really prove oil is stolen from one site, like
using matched impurity levels, sulfur content, or other chemical markings
like viscosity or acidity. An unethical buyer can continue with the
cover of that fungibility. Kent Chrisman is director for global security
with Devon Energy based in Oklahoma. He is a former US Secret Service
agent. He recently joined the Texas law enforcement agency to capture
a ring of thieves in that state. He said, "US
refineries willing to buy stolen crude do not care where it comes from.
Once the product is at their doorstep, the deal is done. They can pay
pennies on the dollar without taking the risk of getting it across the
border. We have seen a big spike in recent years because oil prices
went up. Every year it seems to get worse and worse. It is a profitable
business." See the Yahoo Finance article (CLICK
HERE).

◄$$$ THE CHINESE HAVE LAUNCHED
AN UNSOLICITED BID FOR CANADIAN ROYALTIES, A MINING FIRM WITH A MAJOR
NICKEL & COPPER PROJECT UNDERWAY. CANADA HAD GENERALLY ENCOURAGED
PARTNERSHIPS, BUT THIS DEAL HAS TWISTS. $$$

The state-owned Jilin Jien Nickel Industry
Co has made an unsolicited bid (not yet hostile) for the industrial
metal mining firm Canadian Royalties on August 10th, its first pursuit
of foreign resource assets without first winning agreement with management.
The surprise came with a C$148.5 million unsolicited takeover bid. Jilin
Jien Nickel teamed up with its Canadian partner, Goldbrook Ventures
of Vancouver, to make the bid. Goldbrook Ventures has a 25% stake in
the new firm created as a platform for the formal offer. China has been
on an active shopping spree in the last several months, with numerous
acquisitions on several continents, converting surplus cash and stored
USTreasury Bonds alike for foreign resources, investing in copper, oil,
and iron ore. The Chinese Economy has a growing appetitie to fuel its
fast growing economy. It has operated under a stated mandate by Beijing
leaders to diversify its US$2 trillion in foreign exchange holdings
into so-called hard assets such as commodities, properties that produce
commodities, and companies that have commodity projects.

The surprise offer came when Canadian
Finance Minister Jim Flaherty was in Beijing on a trade mission to encourage
Chinese investment in publicly traded Canadian companies. He was given
an offer that might have taken him off guard. He said, "China
has a need for resources. China has ... substantial USDollar cash reserves.
China is looking for investments abroad. Commercial investments, subject
to proper governance, are welcomed in Canada."
Flaherty had meetings with with Lou Jiwei, chairman of the Chinese sovereign
wealth fund with a $200 billion war chest. This is, after all, a global
battle to control the global landscape, one that could easily morph
into a trade war. Glenn Mullan is chairman and CEO of Canadian Royalties.
Mullan remarked that Jien and Goldbrook are taking a run at the weakened
company in an attempt to pick up its resources at a bargain price. His
public comments indicated a hint of resistance, along with mild excitement
that the financial prospects for Canadian Royalties should turn positive.
A higher stock price tends to enable more ready financing of projects,
with or without bank participation. He responded, "This
one has a long way to go. I think you will see lots of interest in Canadian
Royalties going forward… At the end of the day, this is all about
assets, commodities, nickel specifically, and China's appetite for commodities."

Canadian Royalties is developing the Nunavik
nickel project in northern Quebec. At one time in 2007, Canadian Royalties
was a market darling. Back then, the price of the metal used to make
stainless steel (nickel) soared above $20 a pound. After the commodities
crash and the credit crisis last autumn, a sharp reversal of fortune
befell the Montreal company. The funds to finance their $500 million
Nunavik project collapsed, resulting in Canadian Royalties suspending
the project. The Nunavik project contains approximately 20 million tonnes
of ore, grading about 1% nickel and 1% copper. Due to the minimal bid
size, the offer does not require Canadian Govt approval under the Investment
Canada Act.

The track record in the past few years
has been spotty for China, hobbled by foreign government interference
to the extreme. In 2004, a bid for Noranda (Canadian copper mining firm)
by state-backed China Minmetals Corp broke down when pressure from Canadian
politicians nixed the deal. In 2005, China National Offshore Oil Corp
(CNOOC) withdrew an $18.5 billion offer for Unocal (US-based oil firm
with off-shore drilling capability) following a firestorm of protest
from the USCongress regarding national security. The Australian Govt
recently blocked a $1.7 billion bid for Oz Minerals by the same Minmetals,
citing national security concerns. Lately, the bid by Chinese aluminum
firm Chinalco to invest a large stake in Rio Tinto failed, as London-based
owners balked, again citing national security concerns. In a more more
cooperative deal struck last month, sovereign wealth fund China Investment
Corp agreed to invest $1.74 billion to become the largest B-class shareholder
in Teck Resources, the largest base metals miner in Canada. See the
Globe & Mail article (CLICK HERE).

◄$$$ GLOBAL TRADE TELLS A STRANGE
STORY. THE BALTIC DRY INDEX DISPLAYS WEAKNESS IN GLOBAL SHIPPING. BUT
THE CRUDE OIL PRICE LOOKS POISED FOR A RUN TOWARD THE $100 MARK, LIKELY
FROM THE USDOLLAR CRISIS IN PROGRESS. THE SHANGHAI STOCK MARKET LOOKS
AT RISK OF A DECLINE TO RETEST THE LOWS LAST NOVEMBER. $$$ Nothing is
clear. The global trade is weak, but the USDollar crisis is upon us.